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Trillion-dollar deficits are here to stay

February 10, 2020, 11:02 AM UTC

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Good morning.

President Trump today will propose a $4.8 trillion budget plan that increases spending for defense systems and space travel, but sharply cuts most social safety net programs. And while his plan would propose eliminating more than $4 trillion in spending over the next decade, budget deficits would continue for the next 15 years.

Meanwhile, as Democrats prepare for the New Hampshire primary, they are competing with an expansive array of huge new spending programs and little apparent concern for the budget consequences.

With the economy in its longest expansion in history and unemployment at historic lows, now would normally be a time for belt tightening. But tight belts have gone the way of bipartisan backroom deals. In today’s era of polarized politics, it’s a good bet that we’ll be seeing trillion dollar deficits for years to come.

More news below.

Alan Murray
@alansmurray
alan.murray@fortune.com

TOP NEWS

Coronavirus update

The British government has decided the coronavirus outbreak (global death toll around 910) is a serious and imminent threat to public health, paving the way for the forced quarantining of infected people. The move follows the news that a British man who picked up the virus at a Singapore conference may have transmitted it to people in England, France and Spain. Meanwhile, Sony, Amazon and Nvidia are the latest firms to join Ericsson and LG in pulling out of Mobile World Congress due to the contagion threat. Guardian

Chinese investment

Alibaba is leading the retreat of Chinese investors pulling back from the U.S. Last year, the Chinese e-commerce giant made no publicly disclosed American investments, and there was a sharp drop-off in U.S. investments by Baidu and Tencent, too. There is a global slowdown in investment, but in these cases increased regulatory scrutiny is likely playing a role. Financial Times

Ghosn case

Carlos Ghosn's lawyers have argued in a Dutch court for the release of internal Nissan and Mitsubishi papers relating to his firing, which Ghosn says was unlawful. Ghosn wants around $17 million in damages, due to alleged violation of Dutch labor laws. Why Dutch laws? That's where the Nissan-Mitsubishi entity is registered. Reuters

Victoria's Secret

The sale of L Brands' Victoria's Secret brand to Sycamore Partners may be announced this week, according to a CNBC report that says talks are near completion. It's not clear whether there will be a role for L Brands chief Les Wexner, one of the longest-standing CEOs out there, given his reported ties to Jeffrey Epstein. CNBC

AROUND THE WATER COOLER

Parasite win

Bong Joon Ho's Parasite has become the first non-English language film to win the Oscar for best picture—Bong also won best director. Another first: Taika Waititi became the first indigenous director to win an Oscar, taking best adapted screenplay for Jojo Rabbit (like Parasite, a satire). However, many were unhappy at the lack of nominations for female directors. Fortune

Lagarde's way

Christine Lagarde's first three months at the helm of the European Central Bank have been marked by her push for discipline in the ECB's governing council—central bank chiefs have had to stop trashing policy decisions in public, and they have to put their phones away during meetings. Reuters

Merkel successor

Angela Merkel's protégé, Annegret Kramp-Karrenbauer (a.k.a. AKK), has unexpectedly resigned as leader of Germany's Christian Democratic Union and ruled herself out as candidate for chancellor. AKK, already seen as a weak figure, dithered when the CDU in the state of Thuringia tacitly entered an alliance with the far-right AfD party—Merkel put her foot down remotely from an African tour, ending that politically explosive episode. The upshot is that Merkel's successor is now more likely to come from the right of the CDU. Bloomberg

Irish elections

Meanwhile the direction of Irish politics is also suddenly in doubt, after Sinn Féin—a center-left party that favors reunification with the currently-British province of Northern Ireland—won more than 20% of the vote in national elections. It may have won more if it had anticipated this degree of success and fielded candidates for all seats. This indicates the end of an effective two-party system (namely, Fianna Fáil and Fine Gael) that has lasted for decades. CNBC

This edition of CEO Daily was edited by David Meyer.